Sony Swings to Profit, But 'After Earth' Drags Down Film Unit
The conglomerate, led by CEO Kaz Hirai, said lower theatrical revenue due to the Will Smith film's "underperformance" and fewer home entertainment releases was offset by a music catalog sale.
Sony Corp. on Thursday said it swung to a fiscal first-quarter profit as it benefited from a weaker yen and cost cuts.
Its film unit recorded an operating profit for the quarter ended June 30 thanks to an asset sale that outweighed a theatrical revenue drop that was in part due what the company acknowledged was an "underperformance" of After Earth starring Will Smith and Jaden Smith.
Sony's earnings of $35 million (3.5 billion yen) compared with a loss of 24.6 billion yen in the year-ago period. The entertainment and consumer electronics conglomerate, led by CEO Kaz Hirai, posted a higher-than-expected quarterly operating profit of $367 million (36.4 billion yen), up 489 percent compared with 6.3 billion yen in the same period last year helped by the yen and efforts to restructure Sony's businesses and reduce costs.
Revenue rose 13 percent helped by a weaker yen that boosts overseas sales. The fall of the Japanese currency against the dollar and the euro disguised a 2.8 percent fall in sales on a local currency basis.
Activist investor Daniel Loeb has been pushing Sony to consider an IPO of its entertainment business. Sony's management is expected to announce its rejection of the proposal from his hedge fund Third Point to sell off a part of its entertainment business, according to a report by Nikkei.
In its film unit, Sony swung to an operating profit of $38 million (3.7 billion yen) after a year-ago operating loss 4.9 billion yen as revenue rose 3.6 percent. That was driven primarily by a gain of $106 million (10.3 billion yen) realized on the sale of Sony Pictures Entertainment’s music publishing catalog.
Theatrical marketing expenses declined, but that was offset by a decrease in theatrical and home entertainment revenue, including "the theatrical underperformance of After Earth." The year-ago period had benefited from the release of Men in Black 3 and a higher number of home entertainment releases.
“While Sony Pictures, Music and Financial Services have contributed to profits in recent years, more than anything else for Sony, we needed to turnaround the electronics businesses. We take it as very positive that we managed to record a better than expected operating profit,” said Masaru Kato, chief financial officer.
Sony Music saw sales in local currencies grow 1 percent, up 13.3 percent in yen terms, to $1.131 billion (112 billion yen), a solid performance given the decline in the physical music market. Big-selling albums that contributed to earnings included Daft Punk's "Random Access Memories," Pink's "The Truth about Lov"e and Justin Timberlake's "The 20/20 Experience."
Sony will continue adjusting its business strategies to meet the shift to digital distribution of both music and film, according to Kato.
“Profitability in the TV manufacturing business has improved due to the concentration on higher-end sets, including 4K models,” said Kato, who added that higher prices for both TV sets and smartphones had boosted earnings.
Film revenue increased 3.6 percent in yen, "primarily due to the favorable impact of the depreciation of the yen against the U.S. dollar," Sony said. But it fell 16 percent on a constant currency basis to come in at $1.61 billion.
Sales at Sony's game division remained flat at $1.19 billion, but losses widened due to the research costs of the PlayStation 4 console, which is due to be launched later this year.
Sony's stock closed up 1.7 percent to 2,104 yen ($21.35) in Tokyo before its earnings announcement as the main Nikkei stock index jumped 2.5 percent. The stock is up 128 percent over the last 12 months.
- MOST SHARED
- MOST POPULAR